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Pre-feasibility Study
LAUNDRY & DRY CLEANING
Small and Medium Enterprises Development Authority
Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
REGIONAL OFFICE
PUNJAB REGIONAL OFFICE
SINDH REGIONAL OFFICE
KPK REGIONAL OFFICE
BALOCHISTAN 3rd Floor, Building No. 3,
Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) 36304926-7 [email protected]
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572 [email protected]
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908 [email protected]
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922 [email protected]
September 2015
Pre-Feasibility Study Laundry and Dry Cleaning
September 2015
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Table of Contents
1 DISCLAIMER .............................................................................................................. 3
2 EXECUTIVE SUMMARY ............................................................................................. 4
3 INTRODUCTION TO SMEDA ..................................................................................... 4
4 PURPOSE OF THE DOCUMENT ............................................................................... 5
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT ................................................... 5 5.1 PRODUCTION PROCESS FLOW .............................................................................. 6 5.2 INSTALLED AND OPERATIONAL CAPACITY .............................................................. 7
5.2.1 Product Mix Wise Installed and Operational Capacity .................................... 7
6 CRITICAL FACTORS ................................................................................................. 8
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .................................................. 9
8 POTENTIAL TARGET CUSTOMERS / MARKETS ..................................................... 9
9 PROJECT COST SUMMARY ..................................................................................... 9 9.1 PROJECT ECONOMICS.......................................................................................... 9 9.2 PROJECT FINANCING ......................................................................................... 10 9.3 PROJECT COST ................................................................................................. 10 9.4 SPACE REQUIREMENT ........................................................................................ 11 9.5 MACHINERY AND EQUIPMENT REQUIREMENT ....................................................... 11 9.6 FURNITURE & FIXTURES REQUIREMENT .............................................................. 12 9.7 OFFICE EQUIPMENT REQUIREMENT .................................................................... 12 9.8 RAW MATERIAL REQUIREMENT ........................................................................... 13 9.9 HUMAN RESOURCE REQUIREMENT ..................................................................... 13 9.10 UTILITIES AND OTHER COSTS ............................................................................. 14 9.11 REVENUE GENERATION ...................................................................................... 14
10 CONTACT DETAILS ................................................................................................. 15 10.1 MACHINERY SUPPLIERS ..................................................................................... 15
11 USEFUL WEB LINKS ............................................................................................... 16
12 ANNEXURES ............................................................................................................ 17 12.1 INCOME STATEMENT .......................................................................................... 17 12.2 BALANCE SHEET ................................................................................................ 18 12.3 CASH FLOW STATEMENT .................................................................................... 19
13 KEY ASSUMPTIONS ................................................................................................ 20 13.1 OPERATING COST ASSUMPTIONS ....................................................................... 20 13.2 PRODUCTION COST ASSUMPTION ....................................................................... 20 13.3 REVENUE ASSUMPTIONS .................................................................................... 20 13.4 FINANCIAL ASSUMPTIONS ................................................................................... 20
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1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the said matter. Although, the material included in
this document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions, which may differ from case to case.
The information has been provided on as is where is basis without any warranties or
assertions as to the correctness or soundness thereof. Although, due care and
diligence has been taken to compile this document, the contained information may
vary due to any change in any of the concerned factors, and the actual results may
differ substantially from the presented information. SMEDA, its employees or agents
do not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. The contained information
does not preclude any further professional advice. The prospective user of this
memorandum is encouraged to carry out additional diligence and gather any
information which is necessary for making an informed decision, including taking
professional advice from a qualified consultant / technical expert before taking any
decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
Document Control
Document No. PREF-78
Revision 4
Prepared by SMEDA-Punjab
Revision Date September 2015
For information Provincial Chief Punjab [email protected]
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2 EXECUTIVE SUMMARY
The Importance of Laundry and Dry Cleaning is often under estimated by the
business community of Pakistan. This business is service-oriented and carries large
potential for investment in the metropolitan cities. The life style of people in Pakistan
has changed over the years. Now a days, people are more conscious about their
clothes and use more sophisticated measures for cleaning clothes. Beside
households, commercial businesses such as hotel industry, restaurants and other
offices also needs the services of laundry & dry cleaning on day-to-day basis.
This particular pre-feasibility is intended to provide general information for setting up
an integrated laundry and dry cleaning unit. It provides a range of services relating to
domestic and commercial sector customers. These services range from washing,
drying and pressings of fabric wears to complex and more professional services like
cleaning sensitive stuff, blankets, curtains, shirwanis and other home accessories.
The proposed “Laundry and Dry Cleaning” unit will have an installed capacity of
washing and dry cleaning of 81,180 units per annum. However, initial operational
capacity is assumed to be 70% during first year with a gradual increase of 10% in
the subsequent years up to maximum capacity utilization of 90%. It is suggested to
open the shop in a populated and developed area or nearby to newly developing
housing societies.
Laundry and dry cleaning is not a capital-intensive business. The proposed business
venture entails a total investment of about Rs. 3.55 million. This includes a capital
investment of Rs. 2.67 million and a sum of Rs. 0.88 million as working capital. The
project is financed through 50% debt and 50% equity. The project NPV is around Rs.
3.93 million, with an IRR of 35% and payback period of 3.67 years. The legal
business status of this project is proposed as Sole Proprietorship.
3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was
established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number,
scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral research’ to
identify policy, access to finance, business development services, strategic initiatives
and institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include
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identification of experts and consultants and delivery of need based capacity building
programs of different types in addition to business guidance through help desk
services.
4 PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential
entrepreneurs in project identification for investment. The project pre-feasibility may
form the basis of an important investment decision and in order to serve this
objective, the document/study covers various aspects of project concept
development, start-up, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in Laundry and Dry
Cleaning by providing them with a general understanding of the business with the
intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises
by trial and error, and certain industrial norms that become a guiding source
regarding various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any investment decision.
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT
Due to growing number of working parents, changing life styles of urbanized
population and busy schedules of daily life in metropolitan cities, families prefer to
utilize outsourced dry cleaning and laundry services. Additionally, most of the winter
clothes cannot be washed or cleaned inside home due to their stuff. Therefore,
people prefer to get such clothes washed from dry cleaners. Beside households,
commercial businesses also need the services of laundry & dry cleaning. Businesses
like hotel industry, restaurants and other offices require laundry services on day-to-
day basis. These factors have attributed significantly towards the growth of laundry
and dry cleaning businesses in the country.
This pre‐feasibility study focuses on establishing a laundry and dry cleaning unit in
any metropolis of Pakistan. The proposed unit will provide a wide range of washing,
dry cleaning and pressing services for fabric wears to complex and more
professional services like cleaning sensitive stuff, blankets, curtains, shirwanis and
other home accessories. Target customers of these services will comprise of both
households and commercial consumers (i.e. hotels, restaurants, banquet halls,
caterers, hostels, hospitals and others). Commercial customers will be playing a
significant role in the success of proposed business.
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5.1 Production Process Flow
Liquid solvent and small amount of water are added to the machine. The machine
then stirs clothes in a manner similar to a domestic washing machine to remove dirt,
oil, and stains. Once clean, the clothes are then manually transferred to a dryer
(laundry procedure), then pressed and shaped.
Process Flow Diagram
The above diagram shows two separate processes; laundry and dry cleaning. Both
processes are briefly explained below:
Tagging: The clothes are firstly tagged with a specific number, mentioned in the
invoice given to customers. This procedure is used for identification of clothes for
particular customers.
Sorting: After tagging the clothes are arranged in different sets. Some people sort by
color, others sort by fabric type.
Washing: The clothes are washed in a washing machine using detergents, washing
powders, soaps and etc. This procedure is only applied for laundry services.
Tagging
Sorting
Washing
Dry Cleaning
Drying
Steam Pressing
Packing
Bleach for White Cloths
Detergents & Washing Soap
Perclon (Chemical Applied)
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Dry Cleaning: In this process, the sensitive, expensive and only dry clean
recommended clothes are cleaned. For this purpose, a chemical is used to clean the
clothes, which is known as Perclon.
Drying: The clothes washed in a laundry procedure are dried using dryers.
Steam Pressing: In this process, both the clothes either washed or dry-cleaned are
pressed and shaped using steam press equipment.
Packing: Once pressed, the clothes are properly hanged and covered in the plastic
wrap and then tagged so that they can be easily identified.
5.2 Installed and Operational Capacity
The proposed dry cleaning shop will have an installed capacity of processing around
248 kg (62 kg per bath) of clothes per day. Accordingly, the unit will have an overall
installed capacity processing 81,180 units per annum. Maximum utilization of the unit
is assumed to be 90%, whereas, capacity utilization during first year of operation is
worked out at 70% with gradual increase of 10% annually up to 90% in 3rd year of
operation. Details of the project capacity are as follow:
Table 1: Installed and Operational Capacities
Description Details
Working hours per day 8 hours
Operating shift per day 1
Working days per annum 330 days
Maximum clothes dry clean per day 246 units of clothes
Maximum weight of clothes per day 248 Kg
Maximum weight of clothes per batch 62 Kg
Hours utilized per batch (Laundry & Dry cleaning) 2 hours
5.2.1 Product Mix Wise Installed and Operational Capacity
Weight wise and unit wise distribution of product mix per day of the proposed laundry
and dry cleaning shop is as follows:
Table 2: Weight / Unit Wise Distribution of Product Mix per Day
Description Average Weight
Per Unit (Kg)
Average
Number Of
Units Per Day
Average Weight
Per Day (Kg)
Trousers 0.35 30.00 10.50
Coats (all Kinds)(winter) 2.00 15.00 30.00
Shirts 0.18 40.00 07.20
Jackets / Sweater 2.25 15.00 33.75
Dupatta 0.05 20.00 1.00
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Shalwar Qameez 0.45 40.00 18.00
Blankets 2.25 08.00 18.00
Bed sheets 0.35 20.00 07.00
Curtain 1.25 08.00 10.00
Others (Avg.) 2.25 50.00 112.50
Total 11.38 246.00 247.95
The proposed distribution of product mix is determined on average basis, which will
be affected through seasonal variations.
Details of product mix wise operational and installed capacities are provided in the
table below:
Table 3: Product Mix Wise Installed and Operational Capacity
Items Description % Of Total
Production
Total
Production
Capacity In
Units
(Annually)
Operational
Capacity
70 % (Year
1)
Maximum
Operational
Capacity
90 %
Fabric Wear
Trouser 12.20 9,904 6,933 8,914
Coats (All Kinds) 6.10 4,952 3,466 4,457
Shirts 16.26 13,200 9,240 11,880
Jacket/Sweater 6.10 4,952 3,466 4,457
Dupatta 8.13 6,600 4,620 5,940
Shalwar Qameez 16.26 13,200 9,240 11,880
Home Accessories
Blankets 3.25 2,638 1,847 2,375
Bed Sheets 8.13 6,600 4,620 5,940
Curtain 3.25 2,638 1,847 2,375
Others (Avg) 20.33 16,504 11,553 14,854
Total 100% 81,188 56,832 73,069
6 CRITICAL FACTORS
Following are the factors critical for the success of this business venture:
Warranty of clothes from damages and any type of color fading.
Prime business location for proposed dry cleaning shop.
Reasonable and competitive charges, positioned against competitors.
On time delivery of clothes can leave good impression on the customers.
Technical and efficient labor.
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Right product mix, proper inventory management, emphasis on customer
services.
Employing and retaining skilled labor.
Advertisement on local cable and banners. Existing dry cleaners are not
advertising for their services.
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The recommended location for setting up the proposed laundry and dry cleaning
shop will be a commercial market of developed or developing housing societies
having a considerable population concentration.
Considering that, major cities for instance Karachi, Lahore, Peshawar, Quetta,
Rawalpindi, Islamabad, Multan, Sialkot, Faisalabad, Hyderabad and etc., with large
urban base would be the potential investment areas for the proposed business.
8 POTENTIAL TARGET CUSTOMERS / MARKETS
The major target market for the dry cleaning services will depend on the location
where dry cleaning business is situated. The target customers for proposed business
will not only be general public but also the commercial sector i.e. hostels, catering
companies, film industry and hospitals.
9 PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of
laundry and dry cleaning workshop and retailing. Various costs and revenue related
assumptions along with results of the analysis are outlined in this section.
The projected Income Statement, Balance Sheet and Cash Flow Statement are also
attached as annexure.
9.1 Project Economics
All the figures in this financial model have been calculated for estimated sales of Rs.
9.330 million in year one. The capacity utilization during year one is worked out at
70% with 10% increase in subsequent years up to the maximum capacity utilization
of 90%.
The following table shows Internal Rate of Return, Payback Period and Net Present
Value of the proposed venture:
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Table 4: Project Economics
Description Details
Internal Rate of Return (IRR) 35%
Payback Period (Yrs.) 3.67
Net Present Value (Rs.) 3,930,475
9.2 Project Financing
Following table provides details of the equity required and variables related to bank
loan:
Table 5: Project Financing
Description Details
Total Equity (50%) Rs. 1,776,000
Bank Loan (50%) Rs. 1,776,000
Interest Rate 14%
Tenure of the Loan (Years) 5
9.3 Project Cost
Following fixed and working capital requirements have been identified for operations
of the proposed business:
Table 6: Project Cost
Description Amount Rs.
Capital Cost
Machinery and Equipment 1,575,000
Furniture and Fixture 737,800
Office Equipment 72,500
Pre-operating Cost 77,925
Security Deposit 210,000
Total Capital Cost 2,673,225
Equipment Spare Part Inventory 45,382
Raw Material Inventory 323,393
Up-front Building Rent 210,000
Cash 300,000
Total Working Capital 878,775
Total Project Cost 3,552,000
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9.4 Space Requirement
In order to reduce the initial capital expenditure, the laundry and dry clean shop is
proposed to be set-up on a rental premises. The space should be rented in a
commercial market to ensure easy accessibility of customers.
For the proposed machinery, office, furniture & fixture and other equipment,
approximately 1,000 square feet area is required. Following is the covered area
requirement split into various sections. It is recommended that customer dealing
office area should be separate from the machine and working area.
Table 7: Space Requirement
Sections Total Area (sq. ft.)
Laundry Retail Shop 500
Workshop 500
Total Covered Area 1,000
9.5 Machinery and Equipment Requirement
Following tables provides list of machinery and equipment required for an average
size laundry and dry cleaning shop:
Table 8: Machinery and Equipment Requirement
Description No. Cost Per Unit
(Rs.) Total Cost (Rs.)
Washing Machine 42" x 60" 1 250,000 250,000
Hydro Extractor 24 x 12 1 75,000 75,000
Dryer Machine 48 x 42 1 125,000 125,000
Dry Clean Machine 30 x 18 1 550,000 550,000
Steam Press (Pangenetic) 1 50,000 50,000
Form Finisher Recondition 1 75,000 75,000
Cotton Press 1 200,000 200,000
Boiler 1 200,000 200,000
Steam Ironing Vacuums Table Boiler
With Compressor 1 50,000 50,000
Total 1,575,000
The required machinery and equipment is manufactured and easily available in
Pakistan. These machines can also be imported from Italy, Germany, China and
Japan. However, the prices of new imported machinery are 2 to 3 times higher than
local machinery. The normal market trend is to use second hand imported machines,
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which are easily available. The price of second hand imported machine and first
hand local made machine is almost equal.
Accordingly, the machinery cost estimates in this pre-feasibility study are based on
second hand imported machines.
9.6 Furniture & Fixtures Requirement
Details of the furniture and fixtures required for the project are given below:
Table 9: Furniture & Fixtures Requirement
Description Quantity Unit Cost (Rs.) Total Cost (Rs.)
Iron Racks(10/15 ft) 10 5,000 50,000
Sofa Set (2 Seater & 3 Seater) 1 20,000 20,000
Counter Table 2 8,000 16,000
Chairs 4 2,000 8,000
Stole 4 1,000 4,000
UPS with Battery 1 26,800 26,800
Generator 1 500,000 500,000
Fan 8 2,500 20,000
Exhaust Fan 2 2,500 5,000
Water Dispenser 1 8,000 8,000
Electric wiring & lighting 1 15,000 15,000
Air Conditioners (1.5 ton Split) 1 55,000 55,000
Air Cooler for Workshop 1 10,000 10,000
Total 737,800
9.7 Office Equipment Requirement
Following office equipment will be required for proposed laundry and dry cleaning
shop:
Table 10: Office Equipment Requirement
Description Quantity Unit Cost (Rs.) Total Cost (Rs.)
Laptop with Point of Sales Software
1 70,000 70,000
Telephone 1 2,500 2,500
Total 72,500
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9.8 Raw Material Requirement
Raw material used for the purpose of dry cleaning of clothes is Perclon chemical.
Perchloroethylene, or Perclon, is the dominant chemical solvent used in dry
cleaning. Perclon (Perchloroethylene) is a liquid chemical that consists of 40%
alcohol, 50% kerosene oil and 10% liquid used to save the color fading of clothes.
Perclon (Perchloroethylene) is a clear, colorless liquid and evaporates quickly.
Bleach is also used especially for white clothes. Detergent is used for simple
washing i.e. washing soap and surf. The main raw materials required along with their
usage are listed below. The annual requirement of each raw material is based on an
assumption of 100 kg fabric weight.
Table 7: Raw Material Requirement
Description
Quantity
Required per
100 KG
Rate Per
Unit (Rs.)
Total Cost Per
100 KG (Rs.)
Perclon 20 Liter 270 5,400
Bleach 2 Liter 50 100
Tar Pine Oil 10 Liter 120 1,200
Soda Ash 1 Kg 70 70
Sulphuric Acid 3 Kg 100 300
Total 7,070
9.9 Human Resource Requirement
In order to run operations of laundry and dry cleaning smoothly, details of human
resources required along with number of employees and monthly salary are
recommended as under:
Table 8: Human Resource Requirment
Description No. of Employees Monthly Salary per
Person (Rs.)
Shop Manager 1 35,000
Shop boy 1 13,000
Workshop Manager 1 35,000
Technical Staff (Machine Operator) 1 20,000
Helper (Machine Operator) 2 18,000
Press Operator 5 18,000
Packing Man 1 13,000
Total 12
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9.10 Utilities and Other Costs
An essential cost to be borne by the business is the cost of electricity; a three-phase
commercial electricity connection is required. The annual electricity expenses are
estimated for workshop retail outlet is Rs. 520,560 and Rs. 126,000, respectively.
This project also requires marketing and promotional activities for which
approximately 0.5% of total revenues will be spent on marketing and promotion
expenses annually for the first three years. Moreover, some miscellaneous office
expenses occur every year, which includes (stationary expense, tea and
entertainment expense for loyal customers and employees, commuting expense and
other non-recurring expenses).
9.11 Revenue Generation
Based on the capacity utilization of laundry and dry cleaning, sales revenue during
the first year of operations is estimated as under:
Table 13: Revenue Generation – Year 1
Description of Items No. Of Units
Processed
Finished Goods
Inventory (No.)
Units Available For Sale
(No.)
Sale Price / Unit (Rs.)
Sales Revenue
(Rs.)
Fabric Wear
Trouser 6,930 289 6,641 60 398,475
Coats (All Kinds) 3,465 144 3,321 280 929,775
Shirts 9,240 385 8,855 50 442,750
Jacket / Sweater 3,465 144 3,321 250 830,156
Dupatta 4,620 193 4,427 60 265,650
Shalwar Qameez 9,240 385 8,855 80 708,400
Home Accessories
Blankets 1,848 77 1,771 350 619,850
Bed Sheets 4,620 193 4,427 280 1239,700
Curtain 1,848 77 1,771 200 354,200
Others (Avg.) 11,550 481 11,069 320 3,542,000
Total 56,826 2,368 54,458 - 9,330,956
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10 CONTACT DETAILS
In order to facilitate potential investors, contact details of private sector service
providers relevant to the proposed project be given.
10.1 Machinery Suppliers
In Lahore, there are approximately 5 to 6 manufactures of laundry and dry cleaning
machines, as mentioned below:
Name of Supplier Address Phone
Abdul Waheed Canal Park Gulberg
Nirwana (Pvt) Ltd Gulberg Arcade
Mushtaq Engineering Works Township
786 Washing Lab & Research Centre Nishtar Colony Ferozpur Road
Usman Enterprises Yateem Khana 0322-4553261
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11 USEFUL WEB LINKS
Small & Medium Enterprises Development Authority
(SMEDA) www.smeda.org.pk
Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Ministry of Education, Training & Standards in Higher
Education http://moptt.gov.pk
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and
Industry (FPCCI) www.fpcci.com.pk
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation www.psic.gop.pk
Sindh Small Industries Corporation www.ssic.gos.pk
Pakistan Horticulture Development and Export
Company (PHDEC) www.phdec.org.pk
Punjab Vocational Training Council (PVTC) www.pvtc.gop.pk
Technical Education and Vocational Training Authority
(TEVTA) www.tevta.org
Punjab Industrial Estates (PIE) www.pie.com.pk
Faisalabad Industrial Estate Development and
Management Company (FIEDMC) www.fiedmc.com.pk
Equipment For Dry-Cleaners, Laundries
http://www.pk.all.biz/equipment-
for-dry-cleaners-laundries-
bgr1327
Pearl District Dry Cleaners http://www.yelp.com/biz/pearl-
district-dry-cleaners-portland
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12 ANNEXURES
12.1 Income Statement
Calculations SMEDA
Income Statement
Rs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 9,330,956 12,176,608 15,077,318 16,662,190 18,328,409 20,161,250 22,177,375 24,395,112 26,834,624 29,518,086
Cost of sales
Cost of goods sold 1 3,880,718 5,064,217 6,270,614 6,929,757 7,622,733 8,385,006 9,223,507 10,145,858 11,160,444 12,276,488
Operation costs 1 (direct labor) 1,598,500 1,825,244 2,008,936 2,220,108 2,442,119 2,686,331 2,954,964 3,250,460 3,575,506 3,933,057
Operating costs 2 (machinery maintenance) 272,291 339,180 400,890 422,892 444,037 466,238 489,550 514,028 539,729 566,716
Operating costs 3 (direct electricity) 520,560 572,616 629,878 692,865 762,152 838,367 922,204 1,014,424 1,115,867 1,227,453
Operating costs 4 (direct water) 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Operating costs 5 (direct gas) 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431
Total cost of sales 6,512,069 8,065,257 9,600,717 10,585,063 11,622,424 12,762,465 14,015,400 15,392,462 16,906,007 18,569,621
Gross Profit 2,818,887 4,111,352 5,476,601 6,077,127 6,705,985 7,398,785 8,161,975 9,002,650 9,928,617 10,948,465
General administration & selling expenses
Administration expense 1,236,000 1,359,600 1,495,560 1,645,116 1,809,628 1,990,590 2,189,649 2,408,614 2,649,476 2,914,423
Administration benefits expense 37,080 40,788 44,867 49,353 54,289 59,718 65,689 72,258 79,484 87,433
Building rental expense 840,000 924,000 1,016,400 1,118,040 1,229,844 1,352,828 1,488,111 1,636,922 1,800,615 1,980,676
Electricity expense 126,000 138,600 152,460 167,706 184,477 202,924 223,217 245,538 270,092 297,101
Travelling expense 61,800 67,980 74,778 82,256 90,481 99,530 109,482 120,431 132,474 145,721
Communications expense (phone, fax, mail, internet, etc.) 92,700 101,970 112,167 123,384 135,722 149,294 164,224 180,646 198,711 218,582
Office expenses (stationary, entertainment, janitorial services, etc.) 123,600 135,960 149,556 164,512 180,963 199,059 218,965 240,861 264,948 291,442
Promotional expense 46,655 51,320 56,452 62,098 68,307 75,138 82,652 90,917 100,009 110,010
Depreciation expense 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530
Amortization of pre-operating costs 15,585 15,585 15,585 15,585 15,585 - - - - -
Subtotal 2,817,950 3,074,333 3,356,355 3,666,579 4,007,826 4,367,612 4,780,520 5,234,719 5,734,338 6,283,918
Operating Income 937 1,037,018 2,120,246 2,410,548 2,698,159 3,031,173 3,381,456 3,767,932 4,194,279 4,664,547
Earnings Before Interest & Taxes 937 1,037,018 2,120,246 2,410,548 2,698,159 3,031,173 3,381,456 3,767,932 4,194,279 4,664,547
Interest on short term debt 41,194 43,746 2,552 - - - - - - -
Interest expense on long term debt (Project Loan) 176,967 147,578 113,853 75,154 30,745 - - - - -
Interest expense on long term debt (Working Capital Loan) 57,432 47,687 36,487 23,614 8,818 - - - - -
Subtotal 275,593 239,012 152,893 98,768 39,564 - - - - -
Earnings Before Tax (274,656) 798,007 1,967,353 2,311,780 2,658,595 3,031,173 3,381,456 3,767,932 4,194,279 4,664,547
Tax - 42,201 240,970 309,856 387,149 480,293 567,864 664,483 780,783 921,864
NET PROFIT/(LOSS) AFTER TAX (274,656) 755,806 1,726,383 2,001,924 2,271,447 2,550,880 2,813,592 3,103,449 3,413,496 3,742,683
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12.2 Balance Sheet
Calculations SMEDA
Balance Sheet
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Current assets
Cash & Bank 300,000 - - 1,381,551 3,030,603 4,878,985 7,423,016 10,197,764 13,226,018 16,522,996 22,603,209
Accounts receivable 178,950 206,237 261,339 304,351 335,526 369,079 405,987 446,585 491,244 540,368
Finished goods inventory 283,133 337,812 401,890 441,044 484,268 531,769 583,975 641,353 704,417 773,734
Equipment spare part inventory 45,382 59,357 73,663 81,592 89,955 99,175 109,341 120,548 132,904 146,527 -
Raw material inventory 323,393 443,119 576,113 668,505 772,123 891,802 1,030,032 1,189,687 1,374,088 1,587,072 -
Pre-paid building rent 210,000 231,000 254,100 279,510 307,461 338,207 372,028 409,231 450,154 495,169 -
Total Current Assets 878,775 1,195,559 1,447,925 3,074,388 4,945,538 7,027,964 9,835,265 12,907,192 16,271,102 19,947,425 23,917,312
Fixed assets
Security Deposit 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000
Machinery & equipment 1,575,000 1,417,500 1,260,000 1,102,500 945,000 787,500 630,000 472,500 315,000 157,500 -
Furniture & fixtures 737,800 664,020 590,240 516,460 442,680 368,900 295,120 221,340 147,560 73,780 -
Office equipment 72,500 65,250 58,000 50,750 43,500 36,250 29,000 21,750 14,500 7,250 -
Total Fixed Assets 2,595,300 2,356,770 2,118,240 1,879,710 1,641,180 1,402,650 1,164,120 925,590 687,060 448,530 210,000
Intangible assets
Pre-operation costs 77,925 62,340 46,755 31,170 15,585 - - - - - -
Total Intangible Assets 77,925 62,340 46,755 31,170 15,585 - - - - - -
TOTAL ASSETS 3,552,000 3,614,669 3,612,920 4,985,268 6,602,303 8,430,614 10,999,385 13,832,782 16,958,162 20,395,955 24,127,312
Current liabilities
Accounts payable 89,283 116,088 142,332 157,543 173,710 191,601 211,406 233,337 257,634 246,308
Short term debt - 512,510 31,752 - - - - - - - -
Total Current Liabilities - 601,793 147,840 142,332 157,543 173,710 191,601 211,406 233,337 257,634 246,308
Other liabilities
Long term debt (Project Loan) 1,336,613 1,137,397 908,793 646,465 345,437 - - - - - -
Long term debt (Working Capital Loan) 439,388 374,135 299,137 212,938 113,867 - - - - - -
Total Long Term Liabilities 1,776,000 1,511,532 1,207,930 859,403 459,303 - - - - - -
Shareholders' equity
Paid-up capital 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000 1,776,000
Retained earnings (274,656) 481,150 2,207,533 4,209,457 6,480,904 9,031,784 11,845,376 14,948,825 18,362,321 22,105,004
Total Equity 1,776,000 1,501,344 2,257,150 3,983,533 5,985,457 8,256,904 10,807,784 13,621,376 16,724,825 20,138,321 23,881,004
TOTAL CAPITAL AND LIABILITIES 3,552,000 3,614,669 3,612,920 4,985,268 6,602,303 8,430,614 10,999,385 13,832,782 16,958,162 20,395,955 24,127,312
Liabilities & Shareholders' Equity
Assets
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September 2015 19
12.3 Cash Flow Statement
Calculations SMEDA
Cash Flow Statement
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit (274,656) 755,806 1,726,383 2,001,924 2,271,447 2,550,880 2,813,592 3,103,449 3,413,496 3,742,683
Add: depreciation expense 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530 238,530
amortization of pre-operating costs 15,585 15,585 15,585 15,585 15,585 - - - - -
Accounts receivable (178,950) (27,287) (55,102) (43,012) (31,175) (33,553) (36,908) (40,599) (44,659) (49,124)
Finished goods inventory (283,133) (54,678) (64,079) (39,154) (43,223) (47,502) (52,206) (57,378) (63,064) (69,317)
Equipment inventory (45,382) (13,975) (14,307) (7,928) (8,363) (9,220) (10,165) (11,207) (12,356) (13,623) 146,527
Raw material inventory (323,393) (119,726) (132,994) (92,392) (103,618) (119,679) (138,229) (159,655) (184,401) (212,984) 1,587,072
Pre-paid building rent (210,000) (21,000) (23,100) (25,410) (27,951) (30,746) (33,821) (37,203) (40,923) (45,015) 495,169
Accounts payable 89,283 26,805 26,244 15,211 16,168 17,891 19,805 21,932 24,297 (11,326)
Cash provided by operations (578,775) (548,042) 784,360 1,761,830 2,049,151 2,307,685 2,544,031 2,774,748 3,028,254 3,296,978 6,080,213
Financing activities
Project Loan - principal repayment (199,215) (228,604) (262,329) (301,028) (345,437) - - - - -
Working Capital Loan - principal repayment (65,253) (74,998) (86,198) (99,071) (113,867) - - - - -
Short term debt principal repayment - (512,510) (31,752) - - - - - - -
Additions to Project Loan 1,336,613 - - - - - - - - - -
Additions to Working Capital Loan 439,388 - - - - - - - - - -
Issuance of shares 1,776,000 - - - - - - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 3,552,000 (264,468) (816,112) (380,279) (400,099) (459,303) - - - - -
Investing activities
Capital expenditure (2,673,225) - - - - - - - - - -
Acquisitions
Cash (used for) / provided by investing activities (2,673,225) - - - - - - - - - -
NET CASH 300,000 (812,510) (31,752) 1,381,551 1,649,052 1,848,382 2,544,031 2,774,748 3,028,254 3,296,978 6,080,213
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September 2015 20
13 KEY ASSUMPTIONS
13.1 Operating Cost Assumptions
Description Details
Administration Benefit Expenses 3% of Administration Expenses
Communication Expenses 7.5% of Administration Expenses
Office Expenses 10% of Administration Expenses
Promotional Expenses 0.5% of Revenues
Depreciation Method Straight Line
Depreciation Rate 10% on Furniture & Fixtures
10% on Office Equipment
Operating Cost Growth Rate 5%
13.2 Production Cost Assumption
Description Amount / Percentage
Cost Of Goods Sold Growth Rate 10%
Machinery Maintenance Per Unit Rs. 5.00
Direct Water Rs. 5,000 per month
Direct Gas Rs. 15,000 per month
13.3 Revenue Assumptions
Description Details
Growth in Sales Price 10%
Day Operational /Year 330
Production Capacity in First Year 70%
Percentage Increase in Production Capacity
Every Year 10%
Maximum Production Capacity 90%
13.4 Financial Assumptions
Description Details
Debt 50%
Equity 50%
Interest Rate on Debt 14%
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September 2015 21
Debt Tenure 5 years
Debt Payment / Year 4